Determinants of Inclusive Growth in Zambia

Abstract

Policymakers, scholars and development practitioners agree that economic growth is necessary but insufficient to achieve inclusive growth. Zambia witnessed improved GDP growth in recent decades. However, the country ranks among the poorest and wealth unequal in the world. This paper investigates the long run and short run determinants of inclusive growth in Zambia using the auto-regressive distributed lag (ARDL) and error correction model (ECM) from 1980 to 2022. The findings show that initial income, inflation, foreign direct investment and trade openness improve inclusive growth in the long run. On the contrary, gross fixed capital formation and general government education expenditure have long run negative impact on inclusive growth. However, in the short run gross fixed capital formation and government education expenditure increase inclusive growth while inflation, foreign direct investment and trade openness dampens inclusive growth in the short run. From the findings, the study recommends that policymakers promote the inflow of foreign direct investment through a conducive economic environment, stable inflation rate, and complete openness of the economy to international trade while improving the levels of gross fixed capital formation and education expenditure to achieve higher inclusive growth in the long run.